Net Neutrality Debate in Europe Is ‘Over’

Is throwing net neutrality under the bus the price of a modern European telecom network? While the debate over a free and open Internet has raged in the U.S., it appears in Europe that the argument is largely over; net neutrality lost. What we are now arguing about is where to draw the line, not should we draw one at all.

The debate spans a spectrum that on the one end says all bits are created equal and free and should be treated thus, through the mid-point that says telcos should be able to manage services on their own networks (prioritizing some kinds of packets over others) and offer so-called tiered services (the more you pay, the better the service), right over to the view espoused by Hannes Ametsreiter of Telekom Austria, that it is my network so I say what happens on it.

In the U.S., this has assumed the role of a debate over free speech. In Europe, it has been rather more prosaic.

The problem we have, plead the highly profitable European telcos, is we have little opportunity for growth within Europe. Without growth how can we pay for the modern European networks, be they fourth-generation LTE mobile networks, or high-speed fiber? The drive to mobile computing and a cloud-based infrastructure requires high-capacity networks, something lacking in a lot of Europe, and, plead the telcos, the ever-increasing data demands on our networks is outstripping our ability to cope. Without the networks, Europe will be left behind.

They are right about growth. For example, Spain’s Telefonica, which reported Friday a €10.2 billion profit for 2010, had significant growth in Latin American markets, but not in Europe, a position shared by its European peers, many of which also reported full-year earnings last week. France Telecom on Thursday said tough competition in its domestic market was weighing on margins, while Telecom Italia relied on a strong performance in Brazil to offset continued weakness in its Italian business.

It appears their seeds of complaint have landed on fertile ground in Brussels if the public statements of Neelie Kroes, the commissioner for the digital agenda are anything to go by.

At her confirmation hearing in January 2010 she said Internet providers, “shouldn’t be allowed to limit the access to service or content out of commercial motivation, but only in cases of security issues and spamming.”

“Should Internet providers be allowed to prioritize one kind of internet usage over another? (for instance delaying peer-to-peer applications). And should they be able to charge for that?”

Some seven months later speaking at a summit on “The Open Internet and Net Neutrality in Europe,” her position had shifted even further. Blocking and “throttling” of sites and applications continues to a certain extent, she said:

“This clearly creates a problem if consumers are not duly informed and do not have the possibility to easily switch to alternative providers…I say to those people who are currently cut off from Skype: vote with your feet and leave your mobile provider.”

A spokesman for Ms. Kroes said the commissioner’s position now was that a competitive market should be able to deliver an Internet to which everyone has access: “She is confident that a competitive market should be able to deliver that, within the framework of the guarantees put in place by last year’s Telecoms Package. At the same time, the development of the market, including any commercial arrangements, should be followed closely so that regulatory or other interventions can be initiated if necessary.”

Frederic Huet, managing director of Greenwich Consulting, said that the center of the debate has shifted in Europe. The starting point of the debate over mobile was now managing services and tiered rates: “The debate between net neutrality and tiered access is obviously that tiered access is going to slightly impact pure net neutrality. But at the same time you have to recognize that some content is harder to transport than others.

“Services like streaming video are incredibly hungry on bandwidth. At the same time email and messaging, which are much lighter and also generate revenues, can’t be accessed because of the streaming. So they will have to find a way on the network to deal with this,” he said.

But is there something of a canard going on here? Have we sold our principles rather cheaply? Hannes Wittig, head of European Telecom Research at J.P. Morgan dismisses the LTE argument. “It is somewhat misleading to say that there is not enough money to fund the LTE network. When you talk about fiber, that maybe a discussion worth having, but LTE is not that expensive. Based on our work with the industry, we believe European LTE networks can be deployed without needing to substantially increase spending.”

According to Mr. Wittig, the net neutrality debate is over in Europe simply because the market is working without the need for regulation. “The regulators in Europe have said leave it to the market; if you feel the market is not working, then intervene. I don’t think any regulator will ever give the industry permission explicitly to discriminate between content, but if mobile operators charge more for premium services and make it transparent then that is their prerogative.”

Some telcos have suggested that they may try and charge content providers fees to be carried on their networks. Mr. Wittig is skeptical. “The reality is, let’s say a mobile operator started to charge for YouTube on mobile, somebody else will provide it free.

“If they want to make more money from Google, they might try it. But they will find it difficult to outsmart Google. European mobile network operators over the last 15 years have over estimated their gatekeeper role.”

So if the debate has essentially been won, then why are the telcos continuing to fight so hard?

“In every instance in the past, the regulators have been able to shift their stance very quickly. Whatever assurances they are getting right now…no one will be completely certain that these guarantees will reflect reality.”

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